Microsoft to host partner software

Microsoft will soon detail ways that partner companies will be able to deliver their services based on Microsoft's hosted services, the software company said on Tuesday.

When Microsoft earlier this year announced that it will host its Exchange and SharePoint software for businesses of any size, some third-party software providers wondered about their futures. Companies that offer software that runs on SharePoint, for example, were worried that they wouldn't be able to offer products to customers of Microsoft's hosted service. But on Tuesday, Microsoft said that it plans to host third-party applications for partner companies so that customers of its hosted services can use those applications.

"We'll allow our partners to build applications that we'll host for them and take that to SMBs," said Kevin Turner, COO for Microsoft, speaking to a group of reporters at the company's headquarters in Redmond.

For example, if a partner company develops a human resources application for SMBs and wants to plug that into Office Live Workspace and tailor it for specific vertical industries, the partner will be able to leverage Workspace for that, he said. Workspace is a beta offering from Microsoft that lets users store and share documents online.

Microsoft understands that its partners are concerned about how the company's shift toward hosted services may affect them. "Any time there's a major disruption in the business model, partners who have built a business around a business model get nervous," Turner said.

Last year at its Worldwide Partner Conference, Microsoft was aware that its partners were beginning to be concerned about their futures, but the software company didn't yet know exactly how the business model would work out, he said. This year at the conference in July, however, Microsoft expects to detail business models that its partners can take advantage of.

As the industry in general moves away from traditional packaged software to more hosted services, Microsoft has had to shift its strategy as well. But the company's dependency on selling packaged software and its software-centric install base has caused it to move more cautiously into the SaaS (software as a service) market than competitors that started their businesses on the Web, such as Salesforce.com and Google.

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Rather than embrace the SaaS business model fully, the company has said it would offer software plus services, a strategy Turner reiterated on Tuesday. In fact, he acknowledged that he has intentionally held Microsoft back a bit in moving into hosted services, but he is confident the company will eventually lead the commercial market for hosted software.

"We know exactly how to win in this space," Turner said.

Another Microsoft executive implied that the rest of the market might follow the software company's strategy, an explanation Microsoft has been using to validate its slow move to the SaaS market.

Google and Salesforce.com, which have led the way in hosted services, have both also taken steps toward creating software that resides on the client, said Tim O'Brien, senior director in Microsoft's platform strategy group. Google Gears, for example, adds software to browsers to enhance services. Salesforce.com offers an offline version that lets users access applications when they don't have an Internet connection.

However, in most cases it's Microsoft that likely will be following competitors in the hosted services market. Turner hinted Tuesday that offering a hosted development platform in the cloud, like competitors Salesforce.com and Google, could be a next step for the company's hosted services strategy. Though he said Microsoft was not announcing a hosted platform "today," he did not deny the company had plans to do so in the future.